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Is free hosting dying?

No its not dying in fact people are using this as trick to attract people. Offering a free trial or free hosting with limited hosting is just a way to get more and more people get to know about your web hosting company. Once you get enough free subscribers, you can easily convert them into paid customers.
Once you get enough free subscribers, you can easily convert them into paid customers.

Very few free clients convert. People looking for free hosting are not looking to pay at some point down the road, generally. If they were planning on paying, they would just look for paid hosting in the first place, and not bother with free hosting.
I'd say the cost of free hosting in terms of licenses and having admin staff around to manage the hosting service have become a challenge. It's not as easy as it used to be to make something out of it. Spam and hacking have escalated so much and got nastier than before requiring a high quality of admin staff to manage the server. Admin staff are not as easily available as they used to be. In addition, not many people are using shared free hosting any more for their permanent needs. It's more like fly by nighters who just want to test their Website - usually a WordPress site - then leaves it behind and moves on to paid hosting. Creating more extra work, as of course an idle WordPress Site - usually unsecured - is a security risk.

So to actually make something out of a free hosting business takes more effort than before and many more headaches. I can understand why those who offer free hosting would do it in conjunction with cheap hosting. But yes, there are probably more paid hosts who are using the free hosting as bait for paid hosting than free hosts who use paid hosting to help pay the bills of free hosting.
Hosting is cheaper today. Back in the days, people were paying a fortune for 50MB disk space and a mySQL. Now you can get many more of that for a few bucks a year from good providers. This reduces the necessity for a free hosting market.
Free hosting still exists- I still do it and have room for new clients.

But most of the legitimate use got eaten up by social networking taking away the need for people to have someone host their blog.

I turned off my signup process a while ago because it was a spam magnet and I don't believe I ever had someone who signed up that way prove to be a legitimate client. Today, to get hosting from me all you have to do is have a solid plan for what you want to have and ask me nicely if I'll do it. If its within my capabilities and there are no legal or hostile action concerns, I don't mind helping people out.